PERTH (miningweekly.com) – Major Rio Tinto has reached an agreement with the government of Madagascar on the future fiscal arrangements for the QIT Madagascar Minerals (QMM) joint venture, and renewed their long-term partnership for the sustainable operation of the QMM ilmenite mine in Fort Dauphin.

The new agreement was confirmed by the High Constitutional Court of Madagascar on August 8 and signed by the parties on August 22. 

It will enhance the benefits received by the people of Madagascar and support a sustainable future for the QMM mine, providing certainty for Rio on the fiscal arrangements, Rio said in a statement.

Under the terms of the agreement, there will be an increase in the royalty rate from 2% to 2.5% and QMM will issue its first dividend to the government of Madagascar in 2023.

An amount equalling the $12-million dividend will be invested by the government in the 109-km rehabilitation project of the National Road 13. Rio will also contribute up to $8-million to the road project, subject to predefined milestones and deadlines. The project will bring significant improvement to the region by facilitating the movement of people and critical supplies to hard-to-access areas.  

Rio has agreed to cancel $77-million in advances made to the government of Madagascar to finance their funding of QMM. The State will now hold a 15% free carry ownership of QMM and maintain its 20% voting right, with no obligation to contribute to capital funding or exposure to dilution.  

QMM will also increase support for local communities by doubling its yearly contribution to fund programmes of interest. 

“Rio is committed to the responsible development of its mineral sands extraction business in Madagascar. This agreement is a significant milestone to support a long-term future for QMM and reaffirms our commitment to provide increased benefits for all parties, including the communities of Madagascar,” Rio iron and titanium MD Sophie Bergeron said.

“We are privileged and honoured to be operating in Madagascar and we thank the country and its people for their trust.” 

Rio and the government of Madagascar in 1998 signed the framework agreement which has provided the foundation for Rio’s $1-billion investment in QMM over the last 25 years. While the framework agreement remains in place for the duration of QMM’s mining activities, the fiscal component was subject to renegotiation after 25 years.